Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 stocks made the list for top value stocks in the Airlines industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Airlines Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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5 Undervalued Airlines Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Airlines industry for Monday, May 27, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Airlines industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Air France KLM SA (ADR)’s Value Grade

Value Grade:

Air France KLM-SA is France-based airline company. The Company is engaged in passenger transportation. Its activities also include cargo, aeronautics maintenance and other air-transport-related activities, including catering. The Company's two sub-groups Air France and KLM have a flyer program, Flying Blue, which enables members to acquire miles as they fly with airline partners or from transactions with non-airline partners. Its activities include Passenger transport, Cargo transport, Maintenance and Other activities. The Company's network is organized around the hubs at Paris-Charles de Gaulle and Amsterdam-Schiphol. With these two hubs, the Company links Europe to the rest of the world, with approximately 320 destinations in over 115 countries. Transavia, the Company's subsidiary, has operations in the Netherlands and France directed at medium-haul leisure customers, as well as through its charter flights and tour operators.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Air France KLM SA (ADR) has a Value Score of 97, which is considered to be undervalued.

When you look at Air France KLM SA (ADR)’s price-to-sales ratio at 0.09 compared to the industry median at 0.32, this company has a lower price relative to revenue compared to its peers. This could make Air France KLM SA (ADR)’s stock more attractive for value investors.

Air France KLM SA (ADR)’s price-earnings ratio is 2.98 compared to the industry median at 9.30. This means it has a lower share price relative to earnings compared to its peers. This could make Air France KLM SA (ADR) more attractive for value investors.

Now, let’s assess Air France KLM SA (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 3.2, when compared to the industry median of 6.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Air France KLM SA (ADR)’s shareholder yield is higher than its industry median ratio of 0.05%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

Lastly, let’s take a look at Air France KLM SA (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Air France KLM SA (ADR)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 6.62. This could make Air France KLM SA (ADR) less attractive because the higher P/FCF ratio indicates that Air France KLM SA (ADR) is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Copa Holdings, S.A.’s Value Grade

Value Grade:

Copa Holdings, S.A. is a provider of airline passenger and cargo service through its principal operating subsidiaries, Compania Panamena de Aviacion, S. A. (Copa Airlines) and AeroRepublica, S. A. (Copa Colombia). The Company operates through air transportation segment. Copa Airlines operates from its position located in the Republic of Panama. Copa Airlines provides international air transportation for passengers, cargo and mail, operating from its Panama City hub in the Republic of Panama. Copa Colombia provides service within Colombia and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala and Costa Rica. Copa Colombia provides domestic and international air transportation for passengers, cargo and mail with a point-to-point route network. Its subsidiary, Oval Financial Leasing, Ltd., controls the special purpose entities that have a beneficial interest in the majority of its fleet.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Copa Holdings, S.A. has a Value Score of 86, which is considered to be undervalued.

Copa Holdings, S.A.’s price-earnings ratio is 7.3 compared to the industry median at 9.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Copa Holdings, S.A. more attractive for value investors.

Copa Holdings, S.A.’s price-to-book ratio is lower than its peers. This could make Copa Holdings, S.A. more attractive for value investors when compared to the industry median at 1.41.

You can read more about Copa Holdings, S.A.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Cathay Pacific Airways Ltd - ADR’s Value Grade

Value Grade:

Cathay Pacific Airways Ltd is a company mainly engaged in the provision of international passenger and cargo air transportation. Together with its subsidiaries, the Company operates business through its four operating segments. The Cathay Pacific and Cathay Dragon segment provides full service international passenger and cargo air transportation under the Cathay Pacific and Cathay Dragon brands. The Air Hong Kong segment provides express cargo air transportation offering scheduled services within Asia. The HK Express segment provides a low-cost passenger air transportation offering scheduled services within Asia. The Airline Services segment provides supporting airline operations services include catering, cargo terminal operations, ground handling services and commercial laundry operations.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Cathay Pacific Airways Ltd - ADR has a Value Score of 98, which is considered to be undervalued.

Cathay Pacific Airways Ltd - ADR’s price-earnings ratio is 6.6 compared to the industry median at 9.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Cathay Pacific Airways Ltd - ADR more attractive for value investors.

Cathay Pacific Airways Ltd - ADR’s price-to-book ratio is higher than its peers. This could make Cathay Pacific Airways Ltd - ADR less attractive for value investors when compared to the industry median at 1.41.

You can read more about Cathay Pacific Airways Ltd - ADR’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Gol Linhas Aereas Inteligentes SA (ADR)’s Value Grade

Value Grade:

Gol Linhas Aereas Inteligentes SA is a Brazil-based airline that provides scheduled air transportation for passengers and cargo to over 100 destinations in Brazil, South America, the Caribbean and the United States. The Company operates through two segments: Flight Transportation and Loyalty Program. The Flight Transportation segment operations originate from its subsidiary Gol Linhas Aereas SA (GLA) for the provision of air transportation services. This segment includes GOLLOG, the Company's cargo transportation and logistics business. The Firm operates a fleet of approximately 140 Boeing 737 aircrafts. The Loyalty program segment operations are represented by the SMILES coalition loyalty program, which enables clients to accumulate miles and redeem tickets for more than 700 locations worldwide.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Gol Linhas Aereas Inteligentes SA (ADR) has a Value Score of 88, which is considered to be undervalued.

Gol Linhas Aereas Inteligentes SA (ADR)’s price-earnings ratio is 0.3 compared to the industry median at 9.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Gol Linhas Aereas Inteligentes SA (ADR) more attractive for value investors.

You can read more about Gol Linhas Aereas Inteligentes SA (ADR)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Sun Country Airlines Holdings Inc’s Value Grade

Value Grade:

Sun Country Airlines Holdings, Inc. operates Sun Country Airlines, a hybrid low-cost air carrier that deploys shared resources across its scheduled service, charter, and cargo businesses. The Company focuses on serving leisure and visiting friends and relatives (VFR) passengers, charter customers, and providing crew, maintenance, and insurance (CMI) service to Amazon.com Services, LLC (Amazon), with flights throughout the United States and to destinations in Canada, Mexico, Central America, and the Caribbean. Its Passenger segment consists of two businesses: Scheduled Service and Charter. These businesses both utilize the Company's passenger fleet. Its Cargo segment provides air cargo services. It flies a single-family fleet of mid-life Boeing 737-NG aircraft. Its fleet consists of about 60 Boeing 737-NG aircraft. This includes 42 aircraft in the passenger fleet, 12 cargo operated aircraft through the ATSA with Amazon, and six aircraft that are on lease to unaffiliated airlines.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Sun Country Airlines Holdings Inc has a Value Score of 85, which is considered to be undervalued.

Sun Country Airlines Holdings Inc’s price-earnings ratio is 8.2 compared to the industry median at 9.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Sun Country Airlines Holdings Inc more attractive for value investors.

Sun Country Airlines Holdings Inc’s price-to-book ratio is higher than its peers. This could make Sun Country Airlines Holdings Inc less attractive for value investors when compared to the industry median at 1.41.

You can read more about Sun Country Airlines Holdings Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Airlines Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Airlines stocks as well as other industrys.

Choosing Which of the 5 Best Airlines Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Air France KLM SA (ADR) stock has a Value Grade of A.
• Copa Holdings, S.A. stock has a Value Grade of A.
• Cathay Pacific Airways Ltd - ADR stock has a Value Grade of A.
• Gol Linhas Aereas Inteligentes SA (ADR) stock has a Value Grade of A.
• Sun Country Airlines Holdings Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 undervalued stocks in the Airlines industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Airlines Stocks

Want to learn more about Airlines stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 5 Undervalued Airlines Stocks for Monday, May 27
• 4 Undervalued Airlines Stocks for Friday, May 24
• Why Azul SA (ADR)’s (AZUL) Stock Is Up 5.11%
• 4 Undervalued Airlines Stocks for Thursday, May 23

AAII Disclaimer

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